Indonesia

Chapter 1: A brief history of Brazil's growth

This chapter focuses on the Brazilian growth experience and begins with a brief overview of events that marked the country’s development from its discovery in 1500 to the 19th century. The chapter then divides the years between 1900 and 2008 into four periods, based on the methodology developed by Bai and Perron (1998, 2003) to identify structural breaks in statistical series. We identify regime changes in 1918, 1967 and 1980.

Growth accounting is subsequently used to analyse the behaviour of productivity in the post World War II period and suggests that high inflation might have been a reason for a decline in productivity between 1980 and the mid 1990s.

The chapter shows that the terms of trade have played a significant effect on economic growth and on fluctuations in output. Other factors (such as fiscal stimuli or easy access to foreign finance) also matter for output growth in the short run. From 2004 to 2008, improvements in the terms of trade and government debt reduction underpinned economic progress. The emergence of a new economic era in the years to come will depend on wiser fiscal policies than those of the past.